Our opinion on the current state of AEL

2023年11月14日

Allied Electronics Corp, or Altron (AEL), is an information and communications technology company which was started by Bill Venter in 1965. It has recently been re-focusing on its core business and has sold its 80% stake in Powertech and its 100% subsidiary, Altech UEC (a developer of set-top boxes). Powertech was also sold to a BEE consortium. Altron is in the process of selling CBI Telecom Cables. Altron operates in six African countries as well as the UK and Australia. The company said it had "...secured key wins in both the public and the private sector...", including the Gauteng Broad Band Network phase 2 contract and FNB's data and analytics contract. Netstar won the eThekwini 3-year contract for vehicle tracking for 7000 vehicles. Bytes, in the UK, which has now been unbundled and separately listed both in the UK and in an inward listing on the JSE, won a 5-year contract for Windows 10 from the NHS (UK). Altech aims to re-structure its debt to reduce its interest bill and has resumed paying dividends. They acquired Phoenix Software in the UK for R698m. On 17th December 2020, the company announced the successful listing of its subsidiary Bytes Technology on the London Stock Exchange (LSE) at a price of GBP2.70. This unlocked considerable value into the hands of Altron shareholders but resulted in a "cliff" in the Altron share price chart. We believe that this share will continue to perform well going forward. In its results for the six months to 31st August 2023 the company reported revenue up 4% and headline earnings per share (HEPS) up 19%. The company said, "Altron Group results were impacted by provisions and impairments (collectively referred to as the "Non-Cash Adjustments") raised in two non-core subsidiaries, namely Altron Nexus of R334 million, in relation to the restructuring of Altron Nexus due to the loss of the Gauteng Broadband Network contract and the City of Tshwane exposure, and Altron Document Solutions of R95 million. This includes the goodwill impairment raised at Altron Group level of R33 million in relation to Altron Nexus". Technically the share has been moving sideways between 750c and 1330c since December 2020. At its current price it is trading at 86% of its net asset value (NAV).